Wealth management firms emphasize the value of "organic growth" through advisors bringing in more client assets and drawing in new customers.
That creates a missed opportunity, according to Stifel Independent Advisors CEO and President Alex David. Independent broker-dealers can also help advisors grow "inorganically," "by bringing on other advisors, as well as buying books of business," he said in an interview.
While David supports his independent advisors in client acquisition, he sees that emphasis as missing a key driver of profitability.
"Most firms on the employee side, as well as on the independent side, almost solely concentrate on helping the advisors grow organically client by client," David said.
"What advisors have been telling us over the years is, 'Once I reach a certain level, it seems as if my firm says 'OK, you're on your own now.'"
Dan Seivert, the CEO and managing partner of investment bank Echelon Partners, said in an email that gaining new clients or hiring advisors who don't have clients to bring over are considered forms of organic growth for advisors. However, "acquiring books of business or recruiting an advisor who is bringing their book of business to the SIA platform are forms of inorganic growth," Seivert said.
SIA, Stifel's independent contractor broker-dealer subsidiary, is using that focus on inorganic growth as a lure to attract talent in the crowded but
SIA courts experienced independent advisors by offering them "bespoke," highly customized services. At the same time, it gives them resources to match what a wirehouse offers, said David, himself a
He said the results of the past year show his strategies succeeding.
The St. Louis-based
"Stifel's independent channel has racked up an impressive stream of new hires," said Mark Elzweig, an industry recruiting consultant, in an email. "The firm's boutique structure and experienced leadership are likely two key drivers."
Earlier, David
"I can see us doubling our business every year for the next three years," David said at the time, adding that his mandate from Stifel CEO Ron Kruszewski had been to simply "concentrate on bringing in one quality advisor at a time."
Assuming this year aligns with that initial projection, SIA is likely to aim for over $12 billion of AUM by the end of 2023, if David maintains what he calls his "triple-double" goal. The firm did not respond to emailed questions about its recruitment goals for 2023.
Stifel's wealth management unit
That's much faster than the growth of the firm's employee channel, which ended the year with 2,242 advisors — only a 0.7% bump over the previous year.
Financial Planning spoke with David about what wirehouses and other peers in the industry are missing when it comes to helping advisors grow.
This interview has been condensed for length and edited for clarity.
FP: When you look ahead to the rest of this year, what are your strategic priorities for growing Stifel Independent Advisors?
Alex David: They will center around the core tenets and strategy that we had in 2022. We're surrounding ourselves with resources so that we can bring on board what we call flagship practices. And typically, these are practices that are growing. They have more than $100 million in assets under management.
We're calling these "flagship" because we're looking to literally plant a flag in their local city or town. And then pour resources into that practice to help that practice grow. Not only client by client, but they also oftentimes want to grow by bringing on other advisors, as well as buying books of business. And those last two ways to grow is where we really kick it into high gear.
FP: How common would you say it is for a brokerage to help advisors bring on more advisors?
A.D.: We believe that there is a great opportunity to really push forward in this work. Most firms on the employee side, as well as on the independent side, almost solely concentrate on helping the advisors grow organically client by client. Which is fine, and we try to do that as well.
But what advisors have been telling us over the years is, "once I reach a certain level, it seems as if my firm says OK, you're on your own now. Good work. And they just leave it up to me to grow. Particularly, I want to grow in something other than client acquisition."
We know that space really well, and we have developed very deep competencies around helping advisors do that.
FP: Are you willing to share some examples of specific ways that you can help advisors hire more advisors?
A.D.: We have a secret sauce, a seven-step process I probably wouldn't share. It's proprietary. (Laughs)
But one of the things that we do is, we look at each practice, client by client. If they raise their hand and say, "hey, I'd like to bring on advisors, either for succession planning, or perhaps I'd like to buy their book of business or perhaps just to take advantage of cost efficiencies and cost savings," that's when we overlay that seven-point process.
We use our internal resources. Sometimes we use external. External recruiters, sometimes marketing, sometimes we use a PR campaign, to get that advisor and that practice ready.
FP: Could you share an anecdote of a practice that recently benefited from this customized service?
A.D.: Absolutely. So we had a practice that moved toward the end of '21. He's based in the western Pennsylvania/Ohio area, and his desire has been to have a practice in the Florida region. He wanted us to help him recruit advisors to have a second location.
And so we put our game plan together. It's almost like we're fixing you up on a date. (laughs) So we want to make sure the tie's good, that you look good. And we go through the scripting and the coaching. And then we lined him up with a number of dates, if you will. We had four or five that we placed in front of him, and he's progressing with at least two of those.
He hasn't hired anyone yet, but we're moving forward, they're going through the process, and we hope to be successful in the next couple of months. His practice is somewhere between $300 million to $400 million in assets under management. His focus was to get clients over, all last year, and take care of them even though the market was down 18-19%. And now that he's gotten them over, that's where this whole strategy has come into play.
FP: What differentiates your business, in terms of facilitating transitions?
A.D.: What I think is unique is when we put together our team, as well as outside resources, strategic partners, that can surround this advisor as they come over. Many times it's not only [bringing] over the book of business, it's also standing up a business. It's finding space and technology and carpets and furniture and computers and phones, and all those other things that go beyond a book.
We've been remarkably successful replicating books of business since we've gotten here, the last couple of years. And I think a lot of it comes to this very defined transition process.
FP: What percent of clients would you say, on average, get brought over successfully?
AD: Probably somewhere between 80% and 90% of the advisors that we brought on board have come from an independent model. They already own their book of business. No one's holding onto their clients as they leave.
And because of that, they replicate almost immediately. So it's not taking six, seven, eight, nine months to get all those client assets over. It's taking six or seven weeks.
